Two people working the exact same job, in the same nation, but differently compensated because of where the live just sounds off to me.
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There are all kinds of examples of incentives for going to certain locations. For example Drs getting tuition assistance for committing to a rural area after graduation. It’s a pretty standard recruiting method.
Cost of living varies by area depending mainly on:
1)the income of the people already in that area and
2) the ratio of demand for housing in that area/city vs supply.
Pay is sometimes dependent on cost of living of where you’re working.
Pay is also commonly dependent on how remote the work is since: remote work attracts less workers ( such as oil rig paltforms at sea)
Nice 4000 sqft home with some yard in Minneapolis Minnesota – $500-850k
Same 4000 sqft home in San Francisco – $2million+
Market dictates all – if prices are higher in a market because of high demand, then a company that wants to work in that market has to pay workers enough that they can live in that market.
Taxes might be different, even within the same nation there can be different employee tax rates in different locations. Equipment like office space and such can cost different in different places which also factors into the cost of employing someone. But more importantly there are more available work in larger cities so employees can more easily demand higher pay. And the higher cost of living kind of forces them to negotiate higher pay then workers in smaller cities or rural areas.
But there are actually people who “game” the system by getting high paying jobs in a large city which promises the ability to work 100% remotely or the ability to relocate, and then move out of the city while still keeping their high pay.
We don’t pay people what they are worth as a flat value, we pay them what we think we can get away with. More or less. Usually less.
Salary is a balance between what the employer is willing to pay and what the employee is willing to accept.
If the job is located in a high cost of living area, then the employer must pay more, otherwise people won’t be willing to work there because pay won’t be enough for a decent life.
You work in Lisbon, where average rent is 1600€, I work in Freixo de Espada à cinta where average rent is 800€. You either get paid more or the company can’t hire anyone in Lisbon.
Why do you assume a job is not a commercial transaction and is unaffected by the laws of supply and demand?
Broadly speaking, if there is an over supply of something the cost of that thing goes down.
So if there are 1000 apple pickers and 100 apple picker jobs, the value of that job goes down. Employers will pay less for that job because there will be 10 other people who will ask for less.
However if there are 100 apple pickers and 1000 apple picker jobs, wages will go up. Nothing else has changed only the amount of available workers. The job is exactly the same.
As you said “Two people working the exact same job, in the same nation, but differently compensated”
Wages do not depend only on the job being done.
Cost of living varies dramatically.
If you make $100k in the bay area you can pay rent. If you make that in rural Iowa you are rolling in it.
If you are a company in the bay area you need to pay more to attract employees. When big companies relocate employees from one area to another the regularly adjust compensation.
IMO, taxes should be scaled too. If you have to make 2x the money for the same quality of life, you really have to make way more since that higher money is taxes so much more.
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